Opening Cross: Outage Outrage: In Defense of Bloomberg

Criticism of the incident—where not only did software and hardware components of the vendor’s network fail, but its backup processes also apparently failed, causing thousands of the vendor’s Bloomberg Professional terminals to disconnect from its network—is fair enough, and Bloomberg is rightly promising to investigate the underlying causes of the failures. Bloomberg—known for its fastidious standards—has been relatively immune from outages over the years, while other vendors have all suffered some degree of incident, and sources admit that such a large incident is extremely rare.

But comparing the vendor to mammoth banking empires created through mega-mergers and kept afloat with public funds? Tsk tsk. Let’s not forget, Bloomberg didn’t gain market share through acquisition; it did it through hard work, comprehensive content, and industry-benchmark customer service. Its few acquisitions have been opportunistic add-ons rather than competitive land-grabs. In short, Bloomberg won its privileged position fair and square, with the full complicity of all those clients left twiddling their thumbs.

However, it does spark important debate about the industry’s over-reliance on one provider for data, order routing and chat functions. Sure, the best service provider deserves to achieve a dominant status, but when that provider—no matter how good they are—inevitably suffers an issue, that dominance turns a one-vendor issue into a market-wide catastrophe.

“One or two systems are so dominant that when they stop trading, they introduce systematic risk into the market,” says Morgan Downey, himself a former head of commodities at Bloomberg and currently chief executive of Money.Net, a low-cost data terminal that is hoping to disrupt those bigger players.

Of course, you’d expect other vendors to be crowing about how the mighty have fallen. However, the market stagnation during the market suggests a number of potential scenarios, none of which reflect favorably on other vendors or their clients. So why did all the activity typically conducted over Bloomberg not simply shift to other mechanisms? Possibly because other vendors simply don’t have the same level of market penetration for their terminal business, especially in the front office. Or possibly because when push comes to shove, traders simply don’t feel confident turning to the other tools on their desktops—or, given the extent to which they rely on Bloomberg, perhaps aren’t familiar enough with these tools to use them with confidence.

Or possibly, these users simply don’t have alternatives to turn to when such incidents occur. Bloomberg’s backup processes to prevent such network outages may have suffered problems of their own, but at least the vendor had them in place. It’s entirely possible that some firms adopted a Bloomberg-or-bust approach, especially considering (a) the cost of Bloomberg terminals, and (b) the constraints still facing many firms’ data budgets. And if that’s the case, those firms have no one to blame for being frozen out of the market but themselves.

So before you blame Bloomberg for the keystone position that it holds in today’s financial markets, remember that you put it there, and only you can change that position by putting your money where your data is. That is, if you can pry the Bloomberg terminals from your traders’ cold, dead hands—no mean feat, but something that vendors like Symphony are trying to do for messaging, and which other vendors can capitalize on if they can raise their game. So give other vendors a chance—not only will it increase competition and ultimately result in better deals for you, but you never know when you might need them.